Economic activity in the First District expanded slightly, according to the latest Beige Book report released by the Federal Reserve Bank of Boston. The report, which compiles anecdotal information from business contacts and other sources, found mixed results across sectors.

Prices and wages increased at a modest pace. Consumer spending remained flat for retailers and restaurants, while tourism activity softened somewhat. Manufacturing sales rose modestly on average, with particular strength in products related to artificial intelligence. Staffing services saw a slight increase in activity, mainly due to demand for temporary and administrative roles.

Commercial real estate activity expanded but continued to be considered weak overall. Residential real estate experienced modest growth as increased inventory helped boost home sales. The outlook among manufacturing, staffing, and residential real estate contacts was cautiously optimistic. However, commercial real estate sentiment remained pessimistic, and retail and tourism contacts reported a more guarded outlook.

Employment declined slightly overall, with modest wage growth noted across most sectors. Manufacturing employment contracted somewhat but most firms maintained steady headcounts. Restaurant employment decreased compared to last year due to fewer establishments operating. Retail and hospitality employment levels were largely unchanged.

Staffing firms described labor demand as mostly flat compared to the previous quarter but noted a small uptick in hiring for accounting, finance, and legal professions. Some companies were hesitant to make major hiring decisions; others resumed hiring with an emphasis on temporary positions. Firms remained selective in their hiring processes, leading to longer times needed to fill vacancies.

Price increases were attributed partly to tariffs on goods. A clothing retailer raised prices by 10-15 percent on about half its items because of tariffs; other retailers made only slight adjustments or absorbed costs elsewhere in the supply chain. Restaurant menu prices increased slightly due to higher wholesale food prices and insurance rates despite some declines in input costs like dairy products.

Retailers reported generally flat sales over recent months; one home goods retailer gained market share despite sector softness while a discount retailer saw lower sales linked to reduced cross-border activity with Canada. Airline passenger traffic through Boston was stable recently—domestic travel declined slightly from 2024 levels while international travel rose—and hotel occupancy fell modestly.

Manufacturing contacts reported outcomes ranging from moderate declines (due mostly to shipment timing) to robust gains tied primarily to renewed demand for digital data storage products after clients depleted inventories. AI-related product demand contributed positively to sector optimism moving forward.

Staffing services posted slight increases in placements over the prior quarter—especially for temporary roles—though pay rates edged up only marginally amid rising health insurance and onboarding costs.

Commercial real estate showed minimal improvement: retail properties saw moderate rent growth but rents held steady elsewhere; office leasing ticked up driven by large companies though not matching trends seen recently in New York City markets; new construction remained limited even as multifamily housing demand persisted; industrial leasing lagged behind last year’s level; multifamily leasing was stable but rents stayed flat overall.

Single-family home sales increased moderately year-over-year due mainly to rising inventories alongside stable demand throughout New England except Vermont (where prices fell moderately). Condominium sales varied widely by state but rose slightly on average as inventories grew—much of it representing new construction or existing homes coming onto the market.

Contacts said that high interest rates continued discouraging real estate transactions while tariff uncertainty weighed on broader economic prospects moving forward.

For further details about economic conditions in the district visit www.bostonfed.org/regional-economy.

Historical Beige Book content is available at the Board of Governors website (https://www.federalreserve.gov/monetarypolicy/beige-book-default.htm), with archives hosted by the Minneapolis Fed (https://www.minneapolisfed.org/about-the-fed/history/beige-book-archives).

"One retailer implemented moderate merit wage increases."

"A clothing retailer marked up its prices by 10 to 15 percent on about half of its items, citing tariffs as the reason."

"Several contacts perceived that the combination of tariffs and historically high uncertainty threatened to dampen consumer spending moving forward."

"The firm that experienced a decline in sales said that the timing of shipments was mostly to blame, as the underlying demand, especially for their AI-related products, remained quite strong."

"One contact anticipated significant growth in the overall staffing industry in New England in the coming year, linked to increased demand for administrative, engineering, and light industrial or manufacturing roles."

"One contact pointed out that Boston's office market, which typically tracks New York's in broad terms, was not experiencing a resurgence in office demand on par with that seen recently in New York."